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ENERGY

German public utilities need billions to fund energy gap

Germany's municipal utility companies need tens of billions of euros to cope with an explosion in energy prices, the sector's association VKU said Thursday.

Gas storage facilities in Saxony-Anhalt.
Gas storage facilities in Saxony-Anhalt. Photo: picture alliance/dpa | Klaus-Dietmar Gabbert

“We need liquidity for municipal services, which need to buy gas at up to prices that are 10 times higher than previously,” a VKU spokesman told AFP.

“We’re talking about a sum in the mid tens-of-billions range,” he said, adding that talks were ongoing with the government to plug the gap.

Russia’s war in Ukraine has triggered an earthquake on European energy markets, cranked up the pressure on suppliers and raised fears of possible shortages over the winter.

Germany, as Europe’s top economy has found itself particularly exposed due to its previous heavy reliance on Russian energy imports.

Soaring power costs have hit the country hard as it seeks to pivot to other sources.

Municipal utilities companies cannot pass on the rising costs to clients, who “are simply unable to pay” the difference, said the spokesman, stressing that it was necessary for the federal government to step in.

Chancellor Olaf Scholz’s government this week nationalised energy giant Uniper to stop it from going under.

Earlier in September, the German government entered into discussions with another gas supplier, VNG, over a possible bailout package.

READ ALSO: Germany reaches deal to nationalise troubled gas giant Uniper

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ENERGY

Will Germany set a gas price cap?

As energy costs rise further, more German politicians are coming out in favour of a cap on gas prices - and the government is reportedly looking into the matter.

Will Germany set a gas price cap?

What’s happening?

With electricity bills having doubled in some cases and German inflation seeing post-war record highs of 7-8 percent each month, the German government has been making a lot of money available to help give some relief to people struggling with their bills.

Some of this money is designed to specifically target the financial pressure brought on by the rising price of natural gas – which around half of German households use for heat. Gas also supplies around a quarter of German electricity, but has nearly quintupled in price.

The government’s relief measures include one-off payments and a cut on the VAT put on natural gas from 19 percent to 7 percent.

READ ALSO: KEY POINTS: Everything Germany is doing to help relieve rising energy costs

But more politicians and experts are saying that’s not enough, and are calling for the federal government to pass a Gaspreisdeckel – a cap on the price of gas.

The Left Party has been advocating such a cap for months. But this week, leader of the conservative opposition Christian Social Union (CSU) Markus Söder, whose Bavarian party is sister to the Christian Democrats in the rest of the country, also called for a gas price cap.

“We are experiencing an unprecedented increase in the price of gas and it is essential to prevent normal earners from becoming low earners,” he said.

CSU Leader and Bavarian Premier Markus Söder is in favour of a gas price cap. Photo: picture alliance/dpa | Nicolas Armer

He says the federal traffic light coalition should also abandon plans for its gas levy, which passes on some of the higher costs of importing gas to consumers, and to suspend the national debt brake. That would allow more government money to be spent on relief.

READ ALSO: Germany to push ahead with gas levy plans

Alexander Dobrindt, who leads the CSU in the Bundestag, says a gas price cap should cover 75 percent of consumption in private households, with the remaining 25 percent determined by market rates. Dobrindt argues that allowing the last quarter to fluctuate would incentivise people to still save energy.

Who else wants it?

Söder’s CDU colleagues in the Bundestag say they’re also in favour of a short-term cap on gas prices to get through the winter.

Berlin Mayor Franziska Giffey also called for a cap this week.

She says she’s in favour of a Energiepreisdeckel – or a cap on electricity prices that goes beyond simply gas prices, and intends to take the matter to a meeting the 16 federal state bosses will have with Chancellor Olaf Scholz and his federal government on September 28th.

READ ALSO: German word of the day: Deckel

“The government needs to put an energy price cap in and give people the security they need to sleep peacefully again,” said Giffey, who unlike opposition politicians like Söder, comes from the same Social Democratic Party as Chancellor Olaf Scholz.

Berlin Mayor Franziska Giffey, from Olaf Scholz’s Social Democrats, wants an electricity price cap for both households and businesses. Photo: picture alliance/dpa | Wolfgang Kumm

She says that businesses threatened by rising costs should also benefit from a cap, alongside private households. She says the national debt brake should be suspended to pay for this.

In an interview with public broadcaster ZDF, economics professor and member of the federal government’s economic experts committee Veronika Grimm also called for a gas price cap, provided it still be set up to give people an incentive to save energy.

The Federal Association of German Housing and Real Estate Companies (GdW) is also calling for a federal gas price cap, warning that many tenants may not be able to pay their utility costs.

READ ALSO: Tenants in Germany need eviction protections during energy crisis, says housing boss

What is the government doing about it?

Energy and Economics Minister Robert Habeck of the Greens ruled out a cap on gas prices earlier this week, but Finance Minister Christian Lindner of the liberal Free Democrats has set up a working group that will look at capping gas prices.

The expert group will examine whether a gas price cap is possible, how it might be put into place, and how such a cap would be paid for, ahead of consultations with the federal state heads next week.

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